A formula to achieve your freelance revenue goals

Freelancing can be awesome when it comes to flexibility and utilization of our unique creative capabilities. But the freedom it provides can often be coupled with a lack of a steady or dependable income.

If you don’t know where to start to be sure you meet your freelancing income goals, you’re not alone. Money isn’t everything. But without being able to achieve our income goals, our desire to create a life on our terms freelancing can turn into a situation where we don’t even have any time left for our life. Or worse, we give up on freelancing altogether because we can’t make ends meet.

Planning for your goal revenue

In my years as a freelancer, and as an inherent planner, I’ve always worked towards a yearly goal for my income and have always been able to meet that goal. How? I plan for my yearly goal, then work backwards from year, to month, to daily goals. I’d like to share my formula with you and encourage you to plug in your own figures from the example.

  1. Start with your goal for yearly revenue

    2. For this example, let’s say your goal is $100k

  2. Back out to get your weekly goal

    3. Divide your yearly goal by the amount of weeks you plan to work.

    Let’s use 50 weeks, meaning you plan on taking 2 weeks off for holidays, vacations, etc.

    $100,000/50 weeks = $2000/week

  3. Determine your required weekly billable hours

    4. Divide your weekly goal by your hourly rate

    If your hourly rate is $80/hour, for example: $2000/$80 = 25 hours needed to bill each week

  4. Apply your billable ratio to determine actual hours you’ll need to work

    5. As a freelancer, you know that you will need to work more hours than you bill to take care of non-billable tasks such as marketing, learning new skills, and various aspects of project management. I encourage you to study your habits and know this number, it can be a linchpin in understanding how much you need to work to make a certain amount of money.

    To determine your billable ratio, fill in the blank: In an average 8-hour workday, I bill ____ hours. If your answer is 5 hours, for example, your billable ratio is 5 divided by 8 = 62.5%. Most freelancers’ billable ratio is between 55%-75%.

    Let’s go ahead and use 62.5% from the above example:

    25 hours/62.5% =  40 hours/week

  5. Put it all together

    6. Using the example figures above, if your hourly rate is $80/hour, and you want to make $100,000 a year, you’ll need to set aside 40 hours to work each week and be billing 5 hours for every 8 hour work day.

Plug in your own numbers
I encourage you to figure out your own daily goals and apply this formula to your work, to determine exactly how much you need to work and bill each day to meet your long term goals.

Is it that simple?

The formula is relatively straightforward, the real work comes in the doing. But withou taking your yearly goal down to a daily number, you are less likely to stay you on track and accountable to the big picture. A few notes:

  • Once you have a plan in place, a key to making this formula work is having plenty of work to do. If you aren’t sure how, I recommend subscribing to this blog/receiving the checklist to help you fill your project pipeline.
  • Don’t be alarmed if you are just starting out and your rate is low. You will likely be able to increase your rate substantially once your pipeline is full.
  • Another way to use this formula is to consider how you can leverage your billable ratio as high as 80% with super focus and efficiency and maximize your income.
  • This formula will allow you to work from your annual revenue goal, be sure to take into account that expenses should also be accounted for to deduce your actual income.

Daily goals help you stay on track for your bigger goals

This exercise shows you exactly how much time you need to set aside to do your work, and within that amount of time, reminds you exactly how much of that time you need to bill.

I find that when I have a daily billable goal that is reasonable, I can also keep myself accountable when things slip. As a mom, I often am running out to volunteer at the kids’ school, or find myself with a shortage of time due to my husband’s travel schedule or unexpected sicknesses. When I see that my daily billable goal has not been met, I know exactly how much time in the evenings or weekends I need to make up that work. I find that using a time tracking system (I use Harvest), really increases my ability to watch and keep up with my billable time goals as well.

An added bonus! Knowing when to “turn it off”
An added bonus of having a defined goal each day for your billable hours is that it tells you when you are on track and “complete” for the day. It helps you set your own boundaries in terms of knowing when to “turn it off” — helping you create firm times for you to be “on work” and “off work” which can be so difficult to do sometimes as a freelancer. Once you complete your billable hours, you can allow yourself the satisfaction of knowing your work is complete for the day and you can enjoy other aspects of life outside of your work without guilt.

What’s stopping you? Are you ready to meet your income potential next year?

I’d love to hear your feedback, concerns or questions in the comments below.